President Barack Obama urged Congress on Friday to enact legislation to crack down on international tax evasions and money laundering in response to recent disclosures in the "Panama Papers" scandal.
The announcement follows months of intense scrutiny after the revelations of the Panama Papers, a massive leak to media organizations of roughly 11 million documents showing widespread offshore financial corruption by corporations and the world's elite. The White House plans to take executive action to combat international tax evasion and other financial crimes. On Thursday, the administration proposed changes to U.S. laws and regulations and make it harder to hide assets in American accounts.
"In recent months we've seen just how big a problem corruption and tax evasion have become around the globe," Obama said Friday at the White House, according to Bloomberg. The president noted that even legal methods of avoiding taxation are "still unfair and bad for the economy."Under the plan announced Thursday night, the White House will take executive action to close current loopholes used by foreign nationals in the U.S. for tax evasion, and will ask Congress to enact legislation. The goal will be to change U.S. regulations to increase transparency and crack down on abuses of the banking system.
"In recent weeks, the disclosure of the so-called 'Panama Papers' – millions of leaked documents reportedly revealing the use of anonymous offshore shell companies – has brought the issues of illicit financial activity and tax evasion into the spotlight," the White House said in a statement quoted by Fresh Business Thinking. "The Panama Papers underscore the importance of the efforts the United States has taken domestically, and the efforts we have undertaken with our international partners, to address these shared challenges."
Though any executive orders or passed legislation may encounter opposition later in this election year, the Obama Administration plans to take necessary legislative actions in order to combat money laundering, terrorist financing, and tax evasion through greater transparency rules, including forcing banks to verify the people behind shell companies and offshore bank accounts. However, the president emphasized his administration could not work on its own, and that true reform must come from Congress, where, so far, his proposals have been rejected by the Republican opposition, according to NBC News.
"He called on Congress to pass a law requiring companies to report information on their owners to the Treasury Department. He said lawmakers need to pass a package of new tax treaties aimed at streamlining international business, measures that Sen. Rand Paul of Kentucky has blocked, citing concerns about citizen's privacy."Obama called on the Senate to stop blocking international tax treaties, particularly Senator Rand Paul of Kentucky.
"If the Republican Congress joined us to take some steps that are common sense, we could put some additional wind behind the backs of hardworking Americans," Obama said, according to Bloomberg.
The Treasury Department has also submitted a new package of rules aimed at U.S. companies that move abroad for lower tax rates, making such "tax inversions" less financially appealing. Treasury Secretary Jack Lew supported the new measures in an open letter addressed to Congress.
"The treasury department has long focused on countering money laundering and corruption, cracking down on tax evasion, and hindering those looking to circumvent our sanctions. Building on years of important work with stakeholders, the actions we are finalizing today mark a significant step forward to increase transparency and to prevent abusive conduct within the financial system."The letter notes that a small class of foreign-owned U.S. companies, particularly single-member limited liability companies, are not required to report their information to the Internal Revenue Service (IRS), or even get a tax identification number. Under the new regulations, these companies must report ownership and transaction information to the IRS, helping to prevent tax evasion.
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